ACCA Applied Knowledge · Business and Technology · Ethical conflicts and dilemmas
An accountant is asked by a senior manager to omit a significant liability from the draft financial statements so that a bank loan covenant is not breached. Which fundamental ethical principle is MOST directly threatened by complying with this request?
Integrity is most directly threatened. Leaving out a known liability to avoid breaching a loan covenant would mislead the bank and users of the accounts, and integrity requires accountants to be straightforward and honest in all professional and business relationships.
- AIntegrityCorrect
- BProfessional behaviour only in respect of dress and punctuality
- CConfidentiality
Explanation
Omitting a known liability to mislead the bank would make the accountant party to misleading information, which breaches the principle of integrity (being straightforward and honest). Confidentiality concerns disclosure of information, not misstatement, so it is not the main issue.
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